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Abu Dhabi, Dubai Remain Top Choice for Property Investors

DUBAI — Abu Dhabi and Dubai will be among the top markets in the Middle East and North Africa region to attract long-term regional and global investment into real estate markets for the next couple of years, a 
latest study finds.

Jones Lang LaSalle, a real estate advisery firm, has predicted that Abu Dhabi, Dubai, Cairo and Casablanca are best positioned in the region to attract more long-term foreign investors into their real estate markets over the next 2-3 years.

“As the economic storm passes we expect that real estate markets will move into a period of stablisation in 2010 and recovery in 2011. A key component of this recovery will be the attraction of long-term institutional investment into the real estate sector,” LaSalle said in a report on Sunday.

LaSalle believes many changes are still required in the attitude of existing owners, to position their assets to make them more attractive to regional and global long-term investors. These investors have an increased range of quality real estate assets to consider across both mature and emerging economies.

According to the report, Dubai, the hardest hit of all MENA markets, has already recovered in terms of oil prices and equity markets to attract long-term investors, although the overall recover was termed a ‘work in progress’.

“Long-term investors have been deterred from investing in the MENA region by the short term speculative mentality of both investors and developers over the last few years. As a result, few sales have occurred, despite the continued interest of such investors,” the report said.

AT Kearney, a global strategic consulting firm, in a study last month said that the awaited consolidation wave in the real estate industry in the UAE and Gulf region has started, which will benefit long-term investors and
 the economy.

“Developers demonstrate that they are mindful of lessons learnt from past real estate cycles in other markets, where companies that survived have built strong differentiated capabilities and diversified across the value chain to stabilise sources of revenues,” 
AT Kearney said.

LaSalle has identified a number of factors that will determine the attractiveness of any particular market to the new breed of long-term investors that the region needs to attract. These factors, according to LaSalle, are investment environment competitiveness, real estate market conditions and availability of investable product.

“Dubai has made considerable progress since last year. There are no longer any red lights, with the market being characterised by a mix of amber and the emergence of a few green lights, suggesting progress has been made on all the factors and some have now seen recovery achieved,” LaSalle said.

While expressing concerned over the oversupply situation in Dubai, the advisery firm said, “Despite the improvement in sentiment and the emerging consensus that the Dubai market is through the worst of the crisis, one significant challenge remains — the potential oversupply that is emerging in many sectors of the market. Vacancies in the office market are currently around 25 per cent and the average occupancy rate in the hotel market has fallen to around 65 per cent.”

The oversupply situation is likely to get worse before it gets better in some sectors and this will continue to place downward pressure on prices and rental levels in the short-term, LaSalle said.

abdulbasit@khaleejtimes.com